There are a plethora of articles out there in the past few years indicating that a majority of younger buyers polled suffer from buyer’s remorse: that is to say, they REGRET their purchases.
At best, a bad decision on a purchase can mean years of living in an abode you do not like, or in a location you do not like. It’s an annoyance; an inconvenience.
At worst, you may live in a place you don’t like, are stuck in, and it could prove to be a poor or terrible investment for you financially. We will explore why people commonly have buyer’s remorse and steps you can take to ensure you do not feel this way after your next home purchase.
Causes of Buyer’s Remorse
There are many causes for Buyer’s Remorse. Here are some of the more common causes:
- Not understanding the true cost of ownership. Besides down payment, there are many closing costs associated with buying a house. Additionally, many houses need maintenance done right away after closing, and then continued maintenance done annually moving forward. These costs are real, and are large, and especially first time buyers who are used to no extra costs besides a rent check can be caught off guard.
- Buying a lemon. HGTV makes fixing up a house look easy. It is not, and it is not inexspensive. It is easy for buyers to get in over their heads if they have not researched ahead of time their possible maintenance expenses and/or renovation budget, and also working with someone who can get them solid advice on the condition and maintenance of the house.
- Not researching location. Many buyers have a neighborhood in mind, but due to how competitive the market is, may start looking in other areas that are less expensive, areas where they haven’t lived before or spent much time in. This is a bit of a gamble. Location is everything in real estate. Thorough research of all possible areas is critical.
- Settling. Home buying is painted as fun. However, in the uber-competitive market that is Denver Real Estate, in reality, it oftentimes is stressful and defeating. Some buyers settle to buy something that they originally might not have considered, due to being worn down or in essence giving up. It’s better to take a break and wait a year, two years, than to settle. If you have to compromise on too many things from your wish list for your budget, it’s a sign that you need to wait. There is no shame in waiting; there is no shame in renting. Good things come to those who wait.
- Buying something sight-unseen. This is a recipe for disaster. Maybe you’ll get lucky and the property will be everything you hoped it would be. You probably won’t get lucky, and it will probably not be the place you hoped it would be!
- Having too short a timeframe. A purchase should be considered when your timeframe is at least 5 or more years. Anything shorter and it’s probably better to keep renting. Real Estate is very illiquid and it can be difficult to sell or unload a property quickly historically. Now, in this crazy 2021 Denver market, that is not true, homes sell very quickly. However, if you need to sell a property quickly, within a year or two of purchasing, you may be losing money due to the high transactional costs of selling. A longer time horizon give you a better chance for appreciation to cover selling costs.
- FOMO- Fear of Missing Out. This is going to be its own post in the future, but never buy something to either keep up with your cohort (i.e. friends are buying), or if your fear, anxiety, or emotions overtake logic and fundamentals.
Steps to Take to Guard Against Buyer’s Remorse
- Research, research, research. Do your homework. What do you require in a neighborhood and/or property? Be realistic about what you can afford and your budget. Drive around at different times of day and visit establishments in neighborhoods you might consider.
- Take time to understand costs and the mechanics of a purchase. A good loan officer and good broker will help with this.
- Think about your personal and professional goals for the next 5 years. If they are very up in the air, if you are in a period of transition, or in a transitory period, it’s probably better to keep renting.
- Listen to the experts. Listen to the people you trust. Try to tune out the people who may mean well, but are not versed on the fundamentals (unless they are experts), friends, neighbors, family members, instagram followers etc. . The average person knows very little about buying property or the financial/investment ramifications of such, but they’ll still tell you, “you should do this! you should do that!” “Buy that house I saw on instagram, it’s cute!”
Buying a property, if done well, should be a wealth-building vehicle for you, and should be a place you are happy with and enjoy!